In Depth

The Creative Destruction Of Grocery Stores

Online is bifurcating how consumers shop for everything — including groceries. In response, grocery chains are switching things up, experimenting with smaller formats that primarily offer items that consumers would be more comfortable selecting in person than have a third party deliver to them. Suzi Robinson of Fresh Formats shares her perspective on the shift in the grocery model that’s making some stores “neighborhood markets.”

The rise of Internet-based grocery delivery services like Amazon Pantry and Peapod are changing how people shop for the essentials.

If a consumer has the choice between: (A) trudging to the supermarket, dealing with traffic and parking and crowds and a lengthy checkout experience (and then getting all the way home again) just to get laundry detergent and paper towels, and (B) clicking on those items on a computer screen or mobile device from the comfort of their home and having them delivered to their doorstep, it’s very likely that they’re going to choose the latter option. The changing bottom line of the traditional supermarket model — versus the persistent rise in the delivery format — is bearing out that reality.

Realizing that essentials-to-order services are threatening to eat their lunch, as it were, some brick-and-mortar grocery businesses are shifting their focus in turn. Sure, it’s easier for a consumer to order pet food or marinara sauce online than to do so in store…but there remain categories of grocery items that a shopper is not as comfortable having a stranger select on their behalf: things like a cut of steak or fish, or organic asparagus. Items that the consumer simply takes more personally.

For food and beverage consumers who are particular about their needs — desiring options in the way of natural, organic, vegan, gluten-free foods, all from sustainable sources — the traditional grocery format remains preferable to deliver services. In many areas throughout the U.S., Whole Foods and Trader Joe’s currently stand as a pair of go-to alternatives in that regard…but even those locations don’t necessarily meet the demand for a true, neighborhood type of store, in which product quality and (especially) convenient, local proximity take precedence over the amount of real estate.

In the December 2014, Ahold, the parent company of Stop & Shop, looked to address that issue in the Philadelphia area when it opened Everything Fresh, a 3,700-square-foot market with a focus on organic and prepared foods. The success of that nascent endeavor — and its formula that combines natural food offerings and convenience (both in terms of accessibility and breadth: by comparison, the median average layout of a U.S. supermarket is 46,000 square feet) with the support system of a large conglomerate — buoyed Ahold’s Fresh Formats division to open another, similar market in the Boston neighborhood of Allston, called bfresh.

“The motivation behind Everything Fresh in Philadelphia was to have a real innovation space where we could learn from teammates and customers, [not just] make assumptions,” Suzi Robinson, a spokesperson for Fresh Formats (formerly of Stop & Shop), told PYMNTS. “We’ve learned that people love fresh foods, smart value and local convenience, with an easy-to-shop space right in the neighborhood. Our learning lab in Center City, Philadelphia, certainly played a role in helping us shape bfresh in Allston.”

While noting that the bfresh format was “already under development” by the time Everything Fresh opened, Robinson does acknowledge that the success of the Philadelphia store did help shape some of the elements that went into the bfresh Allston location.

Open since Sept. 4 for a community preview, with its grand opening scheduled for Sept. 18, bfresh — like its (slightly older) sister store Everything Fresh — is smaller (at 10,000 square feet) than a typical supermarket and, unlike centrally located chains, is situated primarily to serve self-identifying foodies in the immediate area.

Robinson describes bfresh as a “new grocery shopping experience,” one that is dedicated to offering fresh foods, value and local convenience — without tradeoffs.

Like Everything Fresh does in Philadelphia, bfresh in Allston provides foodies with options in areas such as organic, antibiotic-free meats and produce and sustainable seafood. A key difference from its progenitor store that Robinson points out (in addition to the size) is that the Allston market will offer what she calls “a whole new take on freshly prepared foods” in its on-site Little Kitchen. Based on the fresh food restaurant model of La Place in Europe, Little Kitchen will provide bfresh shoppers with all-natural, seasonal meals made from scratch.

Although dedicated foodies who shop natural and organic are by nature disinclined toward major supermarket chains — such as the ones that Fresh Formats’ parent company owns — Robinson asserts that bfresh is “a separate company and is not associated in any way with Stop & Shop, other than we share the same parent company.”

What makes bfresh “truly a neighborhood market,” Robinson reiterates, is the company’s belief that the majority of customers will be the foodies that live in proximity to the store.

While bfresh operates with the understanding that “fresh is a hugely important focal point for [its target] customers,” says Robinson, she does not think that the neighborhood-market model will supersede that of the traditional supermarket. On the contrary, she attests that there is a need for both models — and then some: bfresh itself is planning to roll out eCommerce later this year.

On the issue of how the traditional, in-store grocery format is facing serious competition from online delivery models like Instacart and Peapod (interestingly enough, a Stop & Shop-owned service), Robinson refrained from specific comment — but the writing is on the wall.

As Fresh Formats gauges the success of bfresh among Allston-area consumers — whom Robinson describes as “a fantastic and diverse [array] of students, professionals, families, small businesses and more” — she shares that the company plans to open one more bfresh location in Fairfield, Connecticut, before the end of the year.

Beyond that, says Robinson, the company remains “focused on testing and learning from this new format.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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